accounting principles and concepts - american bar...

Accounting Principles and Concepts

Sharon Z. Weiss, Esq.Professor David East, Esq.

Andrea Hartley, Esq.Doneene Damon, Esq.

Chuck Carroll, CPA

Presented to: American Bar Association

April 10, 2008

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Objectives

To provide a basic understanding of...Key accounting conceptsFinancial statements (what are they?)Financial statement analysis techniquesRegulatory governanceAuditor reportsRatio analysisPutting financial statements to useHot Topics (e.g., Sarbanes-Oxley)

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Key Accounting Concepts

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Accounting is the identification, measurement, and communication of financial information about economic entities to interested parties.

Source: Kieso, Donald E. and Jerry J. Weigandt, Intermediate Accounting.Eighth Edition. 1995 NewYork: John Wiley & Sons

AccountingWhat is Accounting?

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AccountingKey Concepts

ConservatismHistorical Cost BasisConsistencySubstance Over Form

Going ConcernMaterialityPeriodic ReportingAccrual Basis

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AccountingElements to Accounting Systems

• ASSETSResources with monetary value

• LIAIBILITIESCreditors’ claims on assets

• OWNERS’ EQUITYOwners’ and/or stockholders’ claims against assets

• REVENUESIncome from sales and other sources

• EXPENSESCosts to company

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Financial Statements

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Financial Statements Definition

“The term ‘financial statement’ refers to a presentation of financial data, including accompanying notes, derived from accounting records and intended to communicate an entity’s economic resources or obligations at a point in time or the changes therein for a period of time in conformity with a comprehensive basis of accounting.”

Source: AICPA Codification of Statements on Auditing Standards, AU §623

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Financial StatementsPrimary SEC Filings for Public Companies

Form 10-K• Contains annual financial

statements• Must be audited• Other company disclosures and

informationForm 10-Q

• Contains quarterly financial statements

• Must be reviewed, not to form an opinion, but to look for anomalies in the data

• Other company disclosures and information

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Financial StatementsOverview of Financial Statements

Financial Accounting Standards Board (FASB) states that a full set of financial statements should include:

• BALANCE SHEETFinancial position at the end of the period

• STATEMENT OF INCOMEIncome for the period

• STATEMENT OF CASH FLOWSCash flows for the period

• STATEMENT OF CHANGES IN EQUITYInvestments by and distributions to owners during the period

• FOOTNOTESAdequate disclosures to understand the financial statements

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Financial StatementsOverview of Financial Statements

BeginningBalance Sheet

January 1

EndingBalance SheetDecember 31

Income Statementfor the Twelve Month Period

Statement of Cash Flowsfor the Twelve Month Period

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Financial StatementsBalance Sheet

Balance Sheet ($ amts in thousands) 12/31/2000AssetsCurrent assets: Cash $3,411 Marketable securities $2,333 Accounts Receivable, net $4,464 Inventories $2,842 Deferred taxes on income $1,151 Deposits and prepaid expenses $1,249 Total current assets $15,450Marketable securities $269Property, plant, and equipment $6,971 Intangible assets $7,256 Deferred taxes on income $54 Other assets, net $1,321 Total assets $31,321Liabilities and stockholders' equityCurrent liabilities: Accounts payable $2,083 Accrued liabilities $2,776 Loans and notes payable $1,479 Accrued salaries, wages and commissions $488 Taxes on income $314 Total current liab ilities $7,140 Long-term debt $2,037 Deferred tax liability $255 Employee related obligations $1,753 Other liabilities $1,328 Total liab ilities $12,513Stockholders' equity: Common stock and paid-in capital $1,535 Note receivable from stock ownership plan ($35) Accumulated other comprehensive income ($470) Retained earnings $18,812Less: common stock held in treasury ($1,034) Total stockholders' equity $18,808 Total liabilities and stockholders' equity $31,321

Balance Sheet Objective:• To provide reliable information about

a company’s economic resources and obligations

• A snapshot of financial position at a point in time

• Sometimes called the Statement of Financial Position

Balance Sheet Equation:

Assets = Liabilities + OwnersAssets = Liabilities + Owners’’ EquityEquity

*See handout *See handout ““Balance Sheet ComponentsBalance Sheet Components”” for further details.for further details.

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Sales-Cost of Sales

=Gross Profit-Operating Expenses

=Operating Profit-FinancingExpenses

-Tax Expense=Net Profit or

(Loss)

Sale

sGross profitO,F, & T

expenses

Cost of

sales

Net profit

Gross profitOperatingexpenses

Cost of

sales

O, F, & Texpenses

Net loss

Sale

s

Financial StatementsIncome Statement

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Income Statement ($ amts in thousands) 12/31/00Sales Revenue $29,139Operating expenses: Cost of goods sold ($8,861) Gross Profit $20,278

Sales, marketing, and administrative expenses $10,875Research expense $2,926In-process research & development $54Interest income ($379)Interest expense $146Other expense, net $67Restructuring charge ($33)

$13,656Earnings before provision for taxes on income $6,622Provision for taxes on income $1,822Net earnings (income) $4,800

Earnings per share: Basic $3.45 Diluted $3.40

Income Statement Objective:• To provide information about changes

in net resources that result from business activities

• Reveals financial performance during a specific period of time

• For public companies, earnings per share will also be reported here

Income Statement Equation:

Revenues Revenues –– Expenses = Net IncomeExpenses = Net Income

*See handout “Income Statement Components” for further details.

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$-

$0.50

$1.00

$1.50

$2.00

$2.50

1stQtr

2ndQtr

3rdQtr

4thQtr

1stQtr

EPSEarnings per Share (EPS)• Calculated by dividing Net

Income (Earnings) by shares of common stock outstanding

• Small fluctuations in EPS may have a large impact on stock price

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A Year in the Life of a Financial StatementHow Transactions Affect the Balance Sheet and Income StatementBalance Sheet

Income Statement

TOTAL ASSETS

Property, Plant & Equipment

Accounts Receivable

Inventory

Cash

ASSETS

TOTAL LIABILITIES

Long-term Debt

Short-term Loans

Accounts Payable

LIABILITIES

TOTAL STOCKHOLDER EQUITY

Retained Earnings

Paid-in Capital

STOCKHOLDER EQUITY

PROFIT/(LOSS)

SG&A Expense

Cost of Goods Sold

Revenue

INCOME STATEMENT as of JAN 1

TOTAL LIABILITIES + STOCKHOLDER EQUITY

How Do Balance Sheet and Income StatementReflect These Business Activities:

1. Start a New Business, deposit cash into bank account

2. Spend money to acquire property, equipment, inventory

3. Operate the business (fixed expenses); Sell products for cash

How Do Balance Sheet and Income StatementReflect These Business Activities:

1. Start a New Business, deposit cash into bank account

2. Spend money to acquire property, equipment, inventory

3. Operate the business (fixed expenses); Sell products for cash

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Income Statement

TOTAL ASSETS


Accounts Receivable

Inventory

Cash

ASSETS

TOTAL LIABILITIES

Long-term Debt

Short-term Loans

Accounts Payable

LIABILITIES


Retained Earnings

Paid-in Capital

STOCKHOLDER EQUITY

PROFIT/(LOSS)

SG&A Expense

Cost of Goods Sold

Revenue



$1,000

$1,000Step 1 (Jan 1st): Startup

Client Starts a New Business (“NewCo”)

Deposits $1,000 cash into NewCo bank account

Step 1 (Jan 1st): Startup

Client Starts a New Business (“NewCo”)

Deposits $1,000 cash into NewCo bank account$1,000$1,000$1,000$1,000

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UPDATE INCOME STATEMENT



Income Statement

TOTAL ASSETS


Accounts Receivable

Inventory

Cash

ASSETS

TOTAL LIABILITIES

Long-term Debt

Short-term Loans

Accounts Payable

LIABILITIES


Retained Earnings

Paid-in Capital

STOCKHOLDER EQUITY

PROFIT/(LOSS)

SG&A Expense

Cost of Goods Sold

Revenue



$1,000

$1,000

$1,000

UPDATE TOTALSUPDATE TOTALS

$0

$1,000

$1,000

$0$0$0$0

THESE TOTALSSHOULD MATCH

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Income Statement

TOTAL ASSETS


Accounts Receivable

Inventory

Cash

ASSETS

TOTAL LIABILITIES

Long-term Debt

Short-term Loans

Accounts Payable

LIABILITIES


Retained Earnings

Paid-in Capital

STOCKHOLDER EQUITY

PROFIT/(LOSS)

SG&A Expense

Cost of Goods Sold

Revenue

INCOME STATEMENT


$1,000

$1,000

$1,000$0

$1,000

$1,000

$0$0$0$0

$5,000$4,000

Step 2: Setting Up Shop

NewCo borrows $5,000 in long-term debt

Spends $4,000 on property, plant, and equipment

Spends $1,000 to purchase inventory

Step 2: Setting Up Shop

NewCo borrows $5,000 in long-term debt

Spends $4,000 on property, plant, and equipment

Spends $1,000 to purchase inventory

$4,000$4,000

$5,000$5,000

$1,000$1,000

$1,000

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Income Statement

TOTAL ASSETS


Accounts Receivable

Inventory

Cash

ASSETS

TOTAL LIABILITIES

Long-term Debt

Short-term Loans

Accounts Payable

LIABILITIES


Retained Earnings

Paid-in Capital

STOCKHOLDER EQUITY

PROFIT/(LOSS)

SG&A Expense

Cost of Goods Sold

Revenue

INCOME STATEMENT


$1,000

$1,000

$1,000$0

$1,000

$1,000

$0$0$0$0

$5,000$4,000

$1,000

UPDATE TOTALSUPDATE TOTALSTHESE TOTALSSHOULD MATCH

$6,000$5,000

$6,000


(no change)


(no change)

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Income Statement

TOTAL ASSETS


Accounts Receivable

Inventory

Cash

ASSETS

TOTAL LIABILITIES

Long-term Debt

Short-term Loans

Accounts Payable

LIABILITIES


Retained Earnings

Paid-in Capital

STOCKHOLDER EQUITY

PROFIT/(LOSS)

SG&A Expense

Cost of Goods Sold

Revenue

INCOME STATEMENT


$1,000

$1,000

$1,000

$500$200$200$100

$5,000$4,000

$1,000

$5,000

$6,000

$6,000Step 3: Doing Business

NewCo sells products totaling $500

Uses $200 in inventory (for goods sold)

Spends $200 on operating expenses

Step 3: Doing Business

NewCo sells products totaling $500

Uses $200 in inventory (for goods sold)

Spends $200 on operating expenses

$200$200

$500$500

$200$200

UPDATE TOTALUPDATE TOTAL

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Income Statement

TOTAL ASSETS


Accounts Receivable

Inventory

Cash

ASSETS

TOTAL LIABILITIES

Long-term Debt

Short-term Loans

Accounts Payable

LIABILITIES


Retained Earnings

Paid-in Capital

STOCKHOLDER EQUITY

PROFIT/(LOSS)

SG&A Expense

Cost of Goods Sold

Revenue

INCOME STATEMENT


$1,000

$1,000

$1,000

$500$200$200$100

$5,000$4,000

$1,000

$5,000

$6,000

$6,000UPDATE BALANCE SHEET

CASH CHANGE: Revenue — Operating Expense = Change ($500 — $200) = $300 Increase

INVENTORY CHANGE: $200 Decrease

RETAINED EARNINGS: $100 Profit

UPDATE BALANCE SHEET

CASH CHANGE: Revenue — Operating Expense = Change ($500 — $200) = $300 Increase

INVENTORY CHANGE: $200 Decrease

RETAINED EARNINGS: $100 Profit

$300$300

$200$200

$100$100

$1,300$800

$100

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Income Statement

TOTAL ASSETS


Accounts Receivable

Inventory

Cash

ASSETS

TOTAL LIABILITIES

Long-term Debt

Short-term Loans

Accounts Payable

LIABILITIES


Retained Earnings

Paid-in Capital

STOCKHOLDER EQUITY

PROFIT/(LOSS)

SG&A Expense

Cost of Goods Sold

Revenue

INCOME STATEMENT as of Dec. 31


$1,000

$1,000

$500$200$200$100

$5,000$4,000 $5,000

$6,000

$6,000

$1,300$800

$100UPDATE TOTALSUPDATE TOTALSTHESE TOTALS

SHOULD MATCH

$6,100

$1,100

$6,100

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BEGINNING CASH

ENDING CASH

Financial StatementsStatement of Cash Flows

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Financial StatementsStatement of Cash Flows

Statement of Cash Flows ($ amts in thousands) 12/31/00OperationsNet earnings $ 4,800 Depreciation and amortization 1,515 In-process research and development 54 Increase in deferred taxes (167) Accounts receivable reserves 33 Increase in accounts receivable (451) Decrease (increase) in inventories 125 Accounts payable and accrued liabilities 57 Decrease in other current and non-current assets 143 Increase in other current and non-current liabilities 454 Net cash from operations 6,563InvestingAdditions to property, plant, and equipment (1,646)Proceeds from the disposal of assets 161Acquisition of businesses, net of cash acquired (68)Purchases of investments (5,383)Sales of investments 4,670Other (102) Net cash used for investing (2,368)FinancingDividends to shareholders (1,724)Repurchase of common stock (973)Proceeds from short-term debt 814Retirement of short-term debt (1,485)Proceeds from long-term debt 4Retirement of long-term debt (28)Proceeds from the exercise of stock options 292 Net cash used for financing (3,100)Net change in cash and equivalents 1,095

Objective: To classify and report cash receipts and payments.

Three Sections:

• Operating. Discloses the inflows and outflows of cash due to operations

• Investing. Discloses the inflows and outflows of cash due to the purchase and sales of PP&E and other investment instruments

• Financing. Discloses the inflows and outflows of cash due to the retirement and receipt of debt

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Financial StatementsFootnotes

Footnotes disclose financial information not contained in the basic financial statements but still required by GAAP

Common Disclosures:• Accounting policies and methods• Description of financial risks• Significant management judgments• Lawsuits/Contingencies• Related party activity• Income taxes• Obligation terms• Employee benefit plans• Subsequent events

Footnotes are necessary to fully understand the Financial Statements

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Regulatory & Auditor Reports

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RegulatoryWho Sets The Rules?

Financial Reporting & Disclosure• Financial Accounting Standards Board (FASB)• Securities and Exchange Commission (SEC)

Auditing & Professional Standards• Before Sarbanes-Oxley Act (2002):

American Institute of Certified Public Accountants (AICPA)• Now: Public Company Accounting Oversight Board (PCAOB)

for public companies and AICPA for private companies

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Auditor ReportsTypes of Auditor Reports

Review4Limited Assurance4Analytical Procedures and Inquiries of Management

Compilation4No Assurance4Compiles Financial Information into Financial Statements

Agreed-upon procedures4Provides limited assurance with respect to specific areas

tested4Distribution of the report is restricted to those specified

users4No opinions

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Auditor ReportsTypes of Auditor Reports

Audit4Positive assurance4Now includes separate report on internal controls4Types of Audit Opinions:

• Unqualified Opinion• Qualified Opinion

o Scope Limitationso Departures from GAAP

• Adverse Opinion

4Possible modifications to standard report:4 Scope limitation4 Disclaimer4 May address Going Concern

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Financial Statement AnalysisTechniques & Ratios

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Financial Statement Analysis

••RelationshipsRelationships

••ComparisonsComparisons

••MeasuresMeasures

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Financial Statement AnalysisWhat Financial Statements Tell You:

Liquidity

• Measures ability to pay current obligations as they are due

Profitability

• Measures efficiency of operations

Solvency

• Measures ability to continue operations and pay obligations

Leverage

• Measures capital structure and ability to obtain financing

*See handout “Ratio Analysis” for examples of specific ratios.

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Financial Statement AnalysisComparisons

Trend Analysis• Comparison for same company

using different periods

Comparative Analysis• Comparative analysis to similar

companies and/or industry

Common-type Analysis• Comparative analysis to

companies of similar type (e.g., size, complexity, etc.)

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Valuation Example: Income Approach

Discounted Cash Flow Example2008 2009 2010 2011 2012

Sales 1,100 1,210 1,331 1,464 1,611Cost of Sales (660) (726) (799) (878) (966)SG&A (231) (254) (280) (307) (338) EBIT 209 230 253 278 306 EBI 125 138 152 167 184Add: Depreciation 85 90 95 100 105Less: Cap Ex (80) (110) (115) (80) (80)Less: Increase in NWC (6) (2) (2) (3) (3) Free Cash Flow 124 116 130 184 206 Terminal Value 2,105 Total Free Cash 124 116 130 184 2,311

Enterprise Value: 1,654 at WACC of: 13.06% less Debt Outstanding (703)Equity Value 951Equity Value / Share 14.47Avg. # Shares Outstanding 65.72

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Valuation Example: Market Approach

Market Multiples ExampleEquity Multiples Sales EBIT EBITDA Market/Book Price/EarningsCircus Circus 2.7 12.8 9.4 2.7 19.0Harrah's Entertainment 2.1 8.2 6.6 5.3 33.0Mirage Resorts 2.9 13.8 10.2 3.2 23.0Showboat, Inc. 1.0 8.4 5.0 2.3 24.5Station Casinos 0.8 29.8 8.1 2.0 13.0

High 2.9 29.8 10.2 5.3 33.0Average 1.9 14.6 7.9 3.1 22.5Low 0.8 8.2 5.0 2.0 13.0

Sales EBIT EBITDA Book Value Net Income2008 Wynn Resorts Forecast 1,100 209 294 432.7 71.0

Equity Value: High 3,173 6,222 2,986 2,277 2,343Equity Value: Average 2,089 3,049 2,309 1,343 1,598Equity Value: Low 896 1,708 1,481 865 923

Equity per share: High 48.27 94.67 45.43 34.65 35.65Equity per share: Average 31.79 46.39 35.13 20.43 24.31Equity per share: Low 13.64 25.98 22.53 13.17 14.04

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Valuation Example: Comparable Transactions

Transaction Multiple ExampleEnterprise Multiples EBITDA Transaction Price EBITDA MultipleComp. Transaction A 210$ 1,640$ 7.8Comp. Transaction B 300 1,820 6.1Comp. Transaction C 250 1,550 6.2Comp. Transaction D 330 1,740 5.3

High 7.8Average 6.3Low 5.3

EBITDATTM Wynn Resorts EBITDA 294$

Enterprise Value: High 2,296Enterprise Value: Average 1,863Enterprise Value: Low 1,550

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Financial Covenants

• Financing agreements generally include one or more financial covenants to enable the lender or investor to monitor the financial performance of the company on a periodic basis. The reason for this is that lenders and investors want to minimize their risk, but for liability and other reasons they do not want to be involved in controlling the day-to-day management of the company.

• Financial covenants customarily included in financing agreements include: • Minimum EBITDA• Interest coverage ratio• Leverage ratio• Fixed charge coverage ratio

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Financial Covenants

• Minimum EBITDA• This covenant requires a company to maintain a certain

level of EBITDA, expressed as a minimum dollar amount. EBITDA is typically measured on a trailing 12 month basis.

• Interest Coverage Ratio• Measured as EBITDA/Interest Expense.• Used to determine how easily a company can pay interest

on outstanding debt. • The lower the ratio, the more the company is burdened by

debt expense.

Net Income+ Interest Expense+ Taxes+ Depreciation & AmortizationEBITDA

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Financial Covenants

• Leverage Ratio• Measured as Funded Indebtedness/EBITDA.• Used to determine the total amount of debt relative to

the cash flows of the company. The higher the ratio, the more highly levered the company is.

• Fixed Charge Coverage Ratio• Measured as EBITDA-Cash Capex/Interest + Principal.• Indicates a firm's ability to satisfy fixed financing

expenses. • A ratio above 1.0 is desirable.

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Z-Score model

• Development• Model• Analysis of ratios included• Using the model

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Z-Score -- Predicting Bankruptcy

)5()4()3()2()1( 54321 XXXXXScoreZ ⋅+⋅+⋅+⋅+⋅=− βββββ

β1 β 2 β 3 β 4 and are coefficients 5β

X1, X2, X3, X4 and X5 are ratiosZ-Score is a predictor of Bankruptcy

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Altman’s Z-Score Research

Return onTotal Assets

Sales to Total Assets

Equity to Debt

Working Capital to Total Assets

Retained Earningsto Total Assets

Ratio

EBITTotal Assets

Net SalesTotal Assets

Market Equityto Total Liabilities

Working Capitalto Total Assets

Retained Earningsto Total Assets

Formula

3.3

0.999

0.6

1.2

1.4

Coefficient

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How to Calculate Z - Score

RatioWeightfactor

Weightedratio

Return on Total Assets X 3.3 ----

Sales to Total Assets X 0.999 ----

Equity to Debt X 0.6 ----

Working Capital to Total

Assets

X 1.2 ----

Retained Earnings to Total

Assets

X 1.4 ----

Z - Score

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Result

Z - Score Status

Above 2.99 Good shape

2.99 - 1.81 Warning signs

Below 1.81 Big trouble – headingtoward bankruptcy

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Summary

• Begin reading a financial statement by knowing what information it is intended to convey.

• Look for meaningful relationships, ratios and changes in these ratios over time to extract useful information.

• Most companies’ accounting is not very complex and their financial statements and notes should be fairly transparent once you understand the basics of financial reporting.

• If a number or performance trend appears questionable or incorrect, ask questions and request the latest correspondence with the company’s auditors.

• If those inquires do not satisfy you, ask your own financial professional to take a look – there may be a problem.

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Professionals

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Sharon Z. Weiss, Esq.Partner – Weinstein, Weiss & Ordubegian LLP

Sharon Z. Weiss joined the firm in 1997 as an associate and was welcomed as a partner on January 1, 2001. Ms. Weiss has extensive experience in a wide area of insolvency matters from various perspectives, including representation of trustees, individual and corporate debtors, creditors and creditors’ committees.

Areas of PracticeIn April, 2007, Ms. Weiss was profiled as an Outstanding Woman Bankruptcy Lawyer by Bankruptcy Law360 and has been names by the Los Angeles Magazine as a Southern California Superlawyer for 2005, 2006 and 2007. Ms. Weiss has served as lead trial counsel in bankruptcy and commercial litigation, including alternative dispute resolution and has considerable experience in handling fraud and Ponzischeme litigation, and bankruptcy appeals which have resulted in published Ninth Circuit opinions. Her clients include debtors engaged in the consumer electronics, healthcare, restaurant, garment, entertainment and retail sales industries, and creditors’ committees in merchandising, manufacturing and apparel industries. Ms. Weiss has served as lead counsel in out-of-court workouts and in the bankruptcy courts in cases involving such varied issues as disputed asset sales and financing, the avoiding powers, executory contracts, pension plans, claims priority, plan confirmation, surcharges and the court’s inherent powers. Ms. Weiss was also appointed to the Bankruptcy Mediation Program Panel for the United State Bankruptcy Court, Central District of California in 2006 and appointed in 2007 as an Attorney Settlement Officer for the United States District Court, Central District of California.

Wesintein, Weiss & Ordubegian LLP

1925 Century Park East

Suite 1150

Los Angeles, CA 90067

Tel: (310) 203-9393

Fax: (310) 203-8110

Professional Affiliations

American Bankruptcy Institute

American Bar Association

California Bankruptcy Forum

Financial Lawyers Conference

International Woman’s Insolvency and Restructuring Confederation

Los Angeles Bar Association

Education

J.D., Southwestern University School of Law

B.A., University of California at Irvine

49

Sharon Z. Weiss, Esq. (continued)

Ms. Weiss regularly speaks on an array of insolvency and business litigation matters to professional audiences at regional, state and national levels. She currently serves as the vice chair of the Executory Contracts Subcommittee of the Business Bankruptcy committee and co-chair of the Woman Business Law Network of the diversity Committee of the American Bar Association’s Business Law Section. Ms. Weiss has held other business Law leadership positions including chair of the Law Student and Yong Lawyer Involvement Subcommittee, co-chair of the Membership: Minorities, Women & Young Lawyers Subcommittee and vice chair of the Litigation Subcommittee. She is a member of the Board of Directors of the California and Los Angeles Bankruptcy Forums and is a co-founding member of the Restructuring and Insolvency Professionals of Southern California. Ms. Weiss is an active member of the American Bankruptcy Institute, American Bar Association, California Bankruptcy Forum, Financial Lawyers Conference, International Woman’s Insolvency and Restructuring Confederation and the Los Angeles Bar Association.

Representative MattersDeath Row Records, Inc./Marion “Suge” Knight: Currently representing largest creditor (claim value of $107 million) in all facets of the Death Row Records and Knight bankruptcy cases.

International Norcent Technology, Inc./Norcent Holdings, Inc.: Currently representing founder, President and Chief Executive Officer of a distributor of consumer electronics with gross revenues of approximately $20 million in connection with companies’ chapter 11 bankruptcy cases, including critical strategic planning with respect to $12 million federal court judgment against Debtor-companies and their President.

MTI Technologies, Corporation: Currently representing bidder of assets and acquirer of claim in technology oriented bankruptcy proceeding.

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Steakhouse Partners, Inc.: Currently representing post-confirmation Creditor Trustee in connection with enforcement of creditor trustee’s $5 million secured claim against reorganized debtor. Also represented pre-confirmation creditors’ committee.

Continental Homecare: Negotiated separation agreement on behalf of former President and Chief Executive Officer for debtor, who is one of the national’s largest consolidation of home medical equipment, durable medical equipment and assisted daily living care products with gross revenue of approximately $2 million per month.

Advance Finance, Inc.: Currently representing chapter 7 trustee as a special litigation counsel to prosecute ponzi scheme avoidance actions before the bankruptcy court and on appellate review. Previously represented former trustee as general counsel.

Christie-Petersen, Inc.: Currently serving as lead general counsel to chapter 7 trustee to liquidate assets of general contractor that specialized in the construction of gas stations with attached convenience stores. Lead litigation counsel to recover on outstanding construction accounts and to recover over $1 million paid to former insider in leveraged buy-out.

Ace Holdings, Inc.: Currently representing chapter 7 trustee in converted chapter 11 case for former company engaged in the design, manufacture and sale of jewelry. Lead litigation counsel in action against pre-petition purchaser and first priority secured claimant and prosecuting recovery claims against insiders.

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Cinnabar, Inc.: Currently representing parent corporation in out-of-court separation agreement between officers and shareholders for company in the business of providing scenery and special effects to the TV, film and the themed industry.

Mi Piace II, Ltd.: Currently represent restaurant in out-of-court wind down.

Steven H. Stern: Represented chapter 7 debtor in definding trustee’s attempts to seize $2 million pension plan. Resulted in published Ninth Circuit opinion, Gil v. Stern (In re Steven H. Stern), 345 F.3d 1036 (9th Cir. 2003).

Published OpinionsKnupfer v. Lindblade (In re Thomas Dyer), 322 F.3d 1178 (9th Cir. 2003).

Gill v. Stern (In re Steven H. Stern), 345 F.3d 1036 (9th Cir. 2003).

Representative PublicationsIn addition to the articles listed below, Ms. Weiss has authored and contributed to numerous other articles relating to litigation and bankrutpcy law.

ABA Business Law Section, Business Bankruptcy Primer Katrina-Rita Working Group, a task force of the ABA Business Bankruptcy Committee. (Assist lawyers in the areas affected by Hurricanes Katrina and Rita), October 2005

52


ABA Business Law Section / Joint Program (Diversity, Young Lawyers & business Bankruptcy Committee); SURVIVOR: How to Outwit, Outlast and Outplay in the Legal World, Spring 2005 (and panel speaker)

ABA Business Law Section / Young Lawyers Forum, Debtors Going In and Out of Possession: Ethical Dilemmas Facing Counsel for Debtors Going In or Coming Out of Reorganization, Spring 2004 (and panel speaker)

ABA Business Law Section / Young Lawyers Forum, Institute for the New Business Lawyer: Everything You Want To Know About How Bankruptcy Affects Your Business Law Practice – Fiduciary Duties of Directors of Insolvent and Nearly Insolvent Corporations, Spring 2004 (and panel speaker)

Los Angeles Bankruptcy forum, Survey of the Ninth Circuit (2003) Highlights from the Bench, Bar and Boardroom, March 2004 (and panel speaker)

Representative Speaking EngagementsMs. Weiss has spoken on numerous panels regarding insolvency-related topics. In additional to the recent programs listed below, she has organized numerous programs and panels and delivered presentations to industry groups such as the California Society of CPAs, The Alternative Board, and is invited annually to speak to the Woman in the Law Seminar Class at Southwestern University School of Law in Los Angeles, California.

Los Angeles Bankruptcy Forum, To Tell Or Not To Tell: Who Is Required To Disclose Another Professional’s Unethical Conduct, June 2007

California Bankruptcy Forum, Co-Moderator: Judge’s Round Table, May 2007

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The Federal Bar Association, Third Annual Bankruptcy Ethics Symposium, The Repercussions of Intentional Ignorance: Professional Liability, September 2006

Beverly Hills Bar Association, “Cutting the Umbilical”: Telecommuting, Working While Traveling and Disaster Planning in the 21st Century, October 2006

National Association of Bankruptcy Trustees, Ponzi Scheme – When It Looks Too Good To Be True It Usually Is: Detecting, Investigating, Litigating & Recovering From Ponzi Schemes, November 2003

Professional QualificationsMs. Weiss was admitted to the California Bar in 1993. She holds degrees from the University of California at Irvine (B.A. 1990) and Southwestern University School of Law (J.D. 1993) (Dean’s List). Ms. Weiss was a member of the Moot court Honors Program and earned First and Second Place awards during national competitions for her writing and advocacy skills.

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W. David East, Esq. South Texas College of Law - Professor of Law & Director of the Transactional Practice Center

W. David East has been a professor at South Texas College of Law in Houston, Texas since 1981. He teaches and writes in the commercial law (Uniform Commercial Code) areas of Payment Systems, Bank Collections and Deposits, Letter of Credit, Secured Transactions in Personal Property, and Sales of Goods, and also has taught Property, Bankruptcy, Consumer Transactions and Transaction Skills. During 1987-1990, Porfessor East was Associate Dean for Academic Affairs at South Texas College of Law, returning to full-time teaching in 1990. In 1998-1999, he began developing and teaching problem model courses in Transaction Skills and is now the Director of the Transactional practice Center at South Texas College of Law. He has a JurisDoctor degree from Baylor University and an LL.M. from The George Washington University in Washington, D.C. He is a member of the American Bar Association’s Section of Business Law. In addition, he was the Chair of the Business Law Section of the State Bar of Texas for 2001-2002 and also was appointed Chair of the Council of Chairs Committee of the State Bar of Texas for 2001-2002. From June 2003 through June 2006, Professor East served as a Section Representative to the Board of Directors of the State Bar of Texas. As an advisory member of the Texas Business Law Foundation, Professor East has testified before legislative committees in Austin, TX on pending commercial statutes. He is a co-author of Anderson, Bartlett & East’s Texas Uniform Commercial Code Annotated (Thompson/West, current ed. 2007).

PublicationsArticlesTexas Nonuniform Amendments to Revised UCC Article 9: Texas Business & Commerce Code Chapter 9, 38 Tex. J. Bus. L. 25 (2003).

South Texas College of Law

1303 San Jacinto Street

Houston, TX 77002

Tel: (713) 646-1879



State Bar of Texas

Education

J.D., Baylor University, Austin, TX

LL.M., George Washington University, Washington, D.C.

B.A., Baylor University, Austin, TX

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W. David East, Esq. (continued)

Articles (continued)The Statute of Frauds and the Parol Evidence Rule Under the NCCUSL 2000 Annual Meeting Proposed Revision of U.C.C. Article 2, 54 SMU L. Rev. 867 (2001).

Check Encoding Warranties under Revised Uniform Commercial Code Article 4 and Regulation CC, 51 U. Miami L. Rev. 97 (1996).

Continuous Perfection of Security Interests in Proceeds From Credit Sales of Inventory-A Look at UCC section 9-306(3), 1986 Colum. Bus. L. Rev. 115 (with Suzanne Byerly). Federal Taxation and Urban Land Development: Does the Tail Wag the Dog?, 7 Real Est. L.J. 200 (1979)(with Frank Schnidman).

BooksAnderson, Bartlett & East's Texas Uniform Commercial Code annotated: with related business statutes (St. Paul, MN: West Group, 2003 - 2005) (with Roy Ryden Anderson & Roger A. Bartlett).

Anderson, Bartlett & East's Texas Uniform Commercial Code annotated: with related business statutes (St. Paul, MN: West Group, 2002) (with Roy Ryden Anderson & Roger A. Bartlett).

Presentations and ProceedingsLegislative Update II: Changes in the Uniform Commercial Code, Representing the Private Business Entity (Houston: South Texas College of Law, 2003). (Tab B)

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W. David East, Esq. (continued)

Presentations and Proceedings (continued)Early Bird Round Table Discussions: Article 9, 18th Annual Real Estate Law Conference (Houston: South Texas College of Law, 2002). (Tab L)

New Article Nine, 35th Annual William W. Gibson, Jr. Mortgage Lending Institute (Austin: University of Texas School of Law, 2001). (Tab 15)

The Revisions to UCC Article 9: How to Stay Perfected, 17th Annual Real Estate Law Conference (Houston: South Texas College of Law, 2001). (Tab N)

Revised Article 9 and Real Estate Law, 12th Annual Advanced Real Estate Drafting Course (Austin: State Bar of Texas, 2001). (Tab 7)

The UCC's New Article 9: Securing the New Millennium, Staying Current with What's Happening in the Real World of Real Estate Law: 16th Annual Real Estate Law Conference (Houston: South Texas College of Law, 2000). (Tab E)

Leases and Executory Contracts. Effects of Rejection, Assumption, or Assignment, Advanced Business Bankruptcy Short Course (Houston: South Texas College of Law, 1988). (Tab K)

Leases and Executory Contracts Effects of Rejection, Assumption, or Assignment, Advanced Business Bankruptcy Short Course (Houston: South Texas College of Law, 1987). (Tab J)

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Andrea S. Hartley, Esq.Shareholder – Akerman Senterfitt Attorneys at Law

Andrea Hartley is a shareholder of Akerman Senterfitt and works Bankruptcy and Creditor’s Rights, and Litigation. She has earned an AV rating by Martindale-Hubbell. Ms. Hartley was admitted to the Florida Bar in 1990 and has court admissions to theU.S. Supreme Court, the U.S. Court of Appeals, Eleventh Circuit, and the U.S. District Court, Southern District of Florida

Notable Client WorkProLogis – Ms. Hartley is southeast regional counsel for ProLogis, one of the largest REIT's in the country. ProLogis owns and operates warehouse facilities throughout the United States and abroad. She currently represents ProLogis in the following bankruptcy cases: Exide Technologies, Inc., Worldcom, Pameco, Inc., USG, and Michel's Distribution.

South Florida Stadium Corp. – Ms. Hartley and other attorneys in the firm represent South FLorida Stadium Corp. in numerous bankruptcy cases including Adelphia, Inc. and Nationsrent, Inc. She was involved in representing South Florida Stadium Corp. with respect to the stadium naming rights in the Fruit of the Loom bankruptcy case.

Marineland Ocean Resort, Inc. – Ms. Hartley and other lawyers in the firm represented the Official Committee of Unsecured Creditors. The representation resulted in the approval of a Plan of Reorganization that provided for a 100% distribution to unsecured creditors.

Akerman Senterfitt Attorneys at Law

One Southeast Third Avenue

25th Floor

Miami, FL 33131-1714

Tel: (305) 374-5600

Fax: (305) 374-5095



The Florida Bar

American Bar Association, Women Rainmakers

Dade County Bar Association

Bankruptcy Bar Association for South District of Florida

Education

J.D., University of Florida College of Law

B.S., University of Florida

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Andrea S. Hartley, Esq. (continued)

Atlas Air, Inc. – Ms. Hartley represented National City Leasing with respect to its aircraft engine lease and 8 figure claim.

LRA Group, Inc. f/k/a Lillie Rubin Affiliates, Inc. – Ms. Hartley and other attorneys in the firm served as co-counsel for the Debtor in its Chapter 11 case. The Debtor operated a chain of stores involved in the retail sale of high-end women's clothing throughout most of the United States. The Debtor was successful in confirming a Chapter 11 plan.

S&R Aerospace, Corp. – Ms. Hartley currently represents the secured lender, Morgan Stanley Dean Witter Commercial Financial Services, Inc. in a state court replevin and the bankruptcy case of S&R Aerospace, Corp. in a aircraft parts dealer.

USA Floral Products, Inc. – Ms. Hartley represented The USA Bouquet Company in the Chapter 11 bankruptcy case of USA Floral Products, Inc. The USA Bouquet Company was the successful bidder for the flower facility located in Miami-Dade County. The asset purchase agreement was approved by the Court and the deal has closed.

Agincourt IV, LLC – Ms. Hartley and other attorneys in the firm represented the Chapter 11 Trustee for the Jockey Club which was the first condominium hotel built in Miami which was internationally known as one of Greater Miami's "hot spots." The Trustee confirmed a Chapter 11 plan which paid the secured creditor in full and provided a 90% dividend to unsecured creditors.

Florida West Airlines, Inc. – Ms. Hartley and other attorneys in the firm represented the Chapter 11 Trustee. The Trustee was successful in confirming a Chapter 11 plan.

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Published Work and LecturesABA Business Law Section, "Present Use of Legislative History", 2003

ABA Business Law Section, Institute for the New Business Lawyer, Panelist, 2004

Speaker, "How Bankruptcy May Impact Commercial Litigation," Florida Bar Seminar, 2005 and 2007

Seminar Speaker, "Everything You want to Know About How Bankruptcy Affects Your Business Law Practice", University of Miami, 2005

Co-Author: "A Lawyer's Ethical Duties in Bankruptcy Cases/Disqualification of Counsel and Disgorgement of Fees," 1993, Bankruptcy Law Conference, Law Education Institute, Inc. and The Bureau of National Affairs, Inc.

Speaker, 2000 Amendments to the Federal Rules of Civil Procedure, the Federal Rules of Evidence and the Federal Rules of Bankruptcy Procedure, 2001

Speaker, "Basic Bankruptcy Code and Rules You Must Know In A Nutshell", Florida Bar Seminar 2000

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Professional ActivitiesMs. Hartley is a member of the Council and Nominating Committee of the Law Practice Management Section of the American Bar Association (ABA). She also serves as the Business Bankruptcy Sub-Committee Vice Chair of the ABA as well as the co-Chair of the Women Rainmakers of the ABA. She is also a Business Law Section Fellow. Ms. Hartley is a member of The Florida Bar and serves on the Bankruptcy U.C.C. Committee. In addition, she is the 2007-2008 Treasurer of the Dade County Bar Association

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Doneene Keemer Damon, Esq.Director – Richards, Layton & Finger, P.A.

Doneene Keemer Damon is a director in the firm’s Business Department. Her practice focuses primarily on formation and operational issues relating to Delaware statutory trusts in all types of commercial and business transactions, including securitizations, structured finance, investment funds, real estate financings, and trust preferred securities transactions. Ms. Damon’s practice also includes representing banks and trust companies in connection with their trust and agency services in various commercial transactions.

Ms. Damon is a frequent lecturer on CDO transactions and the advantages of using Delaware statutory trusts in financing transactions, Ms. Damon also coauthored Chapter 9, “The Role of the Trustee in Leasing Transactions” in the PLI Treatise on Equipment Leveraged Leasing.

Ms. Damon is a member of the Delaware, the Washington, DC, and the American Bar Associations. She is the chair of the American Bar Association Committee on Trust Indentures and Indenture Trustees and co-chair of the Committee on Corporate Director Diversity. Ms. Damon is also a member of the ABA’s Banking Law Committee, the Secured Transactions Committee, the Business Trust Committee, the UCC Committee, the Committee on Partnerships and Unincorporated Business Organizations, the Diversity Committee, the DirectWomen Development Committee, and the Advisory Panel. Ms. Damon is a member of the Multicultural Judges and Lawyers, the Commercial Law, and the Women and the Law Sections of the Delaware State Bar Association. She is also a member of the American Securitization Forum’s Reg AB Committee, Outside Counsel Sub-Forum, and Communication and Education Committee.

Richards, Layton & Finger, P.A.

One Rodney Square

920 North King Street

Wilmington, DE 19801

Tel: (302) 651-7526

Fax: (302) 498-7526



Delaware Bar Association

Washington D.C. Bar Association

Education

J.D., Temple University School of Law

B.S., St. Joseph’s University

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Doneene Keemer DamonDirector – Richards, Layton & Finger, P.A.

Extending her outreach into the community, Ms. Damon serves on the boards of the Lawyers’ Committee for Civil Rights Under Law, Christiana Care Hospital, Meals on Wheels Delaware, Inc., Wilmington Friends School, and the Delaware Art Museum.

EducationMs. Damon graduated cum laude with a B.S. from St. Joseph’s University in Philadelphia, PA in 1989 and received a J.D. cum laude from Temple University School of Law in 1992.

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Chuck Carroll, CPA, CIRA, CTPSenior Managing Director – FTI Consulting

Chuck Carroll is a senior managing director in FTI’s Corporate Finance practice and is based in Dallas. Mr. Carroll has provided business restructuring, corporate finance, and lender services. His engagement experience includes business diagnostics and strategic plan development, capital structure review, cash management, corporate overhead review and reduction implementation, debt negotiations and repayment strategies, financial statement analysis, financial projection development, valuation (including liquidation analysis), bankruptcy preparation, and plan of reorganization formation and negotiation.

During his tenure, Mr. Carroll has represented the senior lenders of a major international power producer with over $10 billion in short- and long-term debt; advised the lending group of a $1.5 billion textile company that was one of the leading makers of bed and bath products in America; and represented a 75-member lending group of a $3 billion nursing home operator before and during the Chapter 11 process. He has experience in many industries, including construction, energy, financial services, healthcare, manufacturing, mining, entertainment and retail.

Mr. Carroll’s notable engagements include American Plumbing & Mechanical (AMPAM), Club Corp, Discovery Zone, Encompass Services Corporation, GasMark, Global Power Equipment Group, Integrated Electrical Services (IES), Midcon Offshore, Minorplanet Systems, NR Marine, Orthodontic Centers of America (OCA), Pillowtex, Q-Entertainment (Q-Zar), Quality Beverage, Reliant Energy, and Sun Healthcare. Further, he has provided significant advice in the retail industry, including matters with Bruno’s, Fiesta Supermarkets, 50-Off Stores, Homeland Stores, Stanley Stores and a global video store chain.

FTI Consulting

2001 Ross Avenue, Suite 400

Dallas, TX 75201

Tel: (214) 397-1603

Fax: (214) 397-1790

Certifications

Certified Public Accountant

Certified Insolvency and Restructuring Advisor

Certified Turnaround Professional


Texas Society of Certified Public Accountants

Association of Insolvency and Restructuring Advisors

Turnaround Management Association

Texas-Ex Student Association

Education

M.A. in Accounting, University of Texas at Austin

B.S. in Finance, Southwest Texas State University

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Mr. Carroll has provided expert witness testimony on issues ranging from plan of reorganization development and feasibility to interest rates and loan to value analysis on real estate. He has also advised on the application of Fresh Start accounting (SOP 90-7) to companies emerging from bankruptcy and was part of a national AIRA task force to suggest revisions and clarifications of the accounting standard to the FASB and SEC. Mr. Carroll has advised on SOP 90-7 issues to Camelot Music, Discovery Zone, Delphi, Eddie Bauer, KB Toys, Levitz and Minorplanet Systems.

Prior to joining FTI, Mr. Carroll worked in the U.S. division of PricewaterhouseCoopers’ (PwC) Business Recovery Services group. Before that, he worked in PwC’s Assurance and Business Advisory Services group performing audits of financial services clients, including securities brokers and dealers, mortgage companies and life insurance companies. Prior to joining PwC, Mr. Carroll was a financial analyst for a national real estate development and management firm.

Mr. Carroll holds an M.A. in accounting from the University of Texas at Austin, where he received the Most Outstanding Student Award for the Class of 1992, and a B.S. in finance from Southwest Texas State University. Mr. Carroll also attended the Washington Campus Program at Georgetown University. He is a certified insolvency and restructuring advisor, certified public accountant and a certified turnaround professional. Mr. Carroll is a member of the Texas Society of Certified Public Accountants, Turnaround Management Association, Texas-Ex Student Association and the Association of Insolvency and Restructuring Advisors.

Chuck Carroll, CPA, CIRA, CTP (continued)

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Q&ASharon Z. Weiss, Esq.Weinstein, Weiss & Ordubegian [email protected]

Professor David East, Esq.South Texas College of [email protected]

Andrea Hartley, Esq.Akerman [email protected]

Doneene Damon, Esq.Richards Layton & Finger, [email protected]

Chuck Carroll, CPA, CIRA, CTPFTI [email protected]

accounting principles and concepts - american bar...

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